Canadian Commercial Real Estate Warming Up in 2015
[caption id="attachment_2663" align="alignright" width="300"] Image Source: Prayitno[/caption]
A gathering of Canada's largest retailers at the recent CIBC retail conference concluded current trends are actually benefiting Canadian business. CIBC analyst Perry Caicco even believed "the outlook for 2015 is more positive for retailers than it has been for a couple of years." If that's the case, then commercial real estate could be breaking new records when it comes to delivering returns.
The conference highlighted the fact that lower gas prices are "putting more money into the pockets of consumers"and that "the economy is faring well." According to The Toronto Star newspaper, Target's exited from the Canada removes a potentially strong competitor, and is creating a better environment for Canadian businesses.
However, this doesn't mean that US firms aren't benefiting from Canadian business and retail either. The entry of US based technology companies is helping the office sector, creating jobs and adding more money to the economy. Facebook and other tech firms are working on improving the backend of The Internet of Things and its security. This provides a strong framework for Canadian firms on the frontline to put to work in homes and businesses. In contrast to previous fears, we continue to see that the more connected we are, the more efficient and profitable businesses will become, especially retailers.
As our homes and devices become more connected, shopping may become more automated and streamlined. This is actually making retailers more profitable, as small storefronts at shopping plazas can do far more business resulting in increasing revenues, which is great news for their landlords and retail investors.
What's good for Canadian retail is in turn good for Canada's other commercial real estate sectors. When Canadian business is strong, office buildings are in higher demand. When these sectors are doing well multifamily apartments are fed by more workers and the capacity for renters to pay more for units. In the current environment this could even help prop up Canada's industrial as a despite oil price softness.
The outlook for Canadian commercial property investment is still bright ahead. Some may even be surprised at how some investments and sectors outperform expectations over the next several quarters.